It’s official. Boston is a $100 billion city.
With the real estate market surging, the total estimated value of its residential and commercial property jumped over that threshold for the first time and has climbed to a total of $110 billion, according to a new city assessment.
The increase will mean significantly higher tax bills for many property owners next year, although the extent of those increases will not be known until tax rates are set in the coming days.
To stave off sticker shock, the city’s assessing department has already begun reaching out to owners in some neighborhoods where values have increased the most.
Declan Mehigan, managing partner of Lir and a second pub on Boylston Street, was told the value of one of his buildings has jumped 81 percent, to $3.5 million from about $1.9 million. He said his overall tax bill will rise by tens of thousands of dollars.
“I don’t know what we’re going to do,” said Mehigan, who is also part owner of Globe Bar & Cafe. “This is going to be tough for the small businesses in the Back Bay.”
Ronald Rakow, commissioner of assessing, said the city has met with some property owners about their assessments, but formal abatement requests won’t arrive before bills go out next month.
Overall, Rakow said, the value of the city’s real estate has risen 10 percent over last year. It is the largest percentage increase since 2007, when values jumped by 15 percent before beginning to nosedive during the Great Recession.
But the tax impact of higher assessments will be partially offset by the state’s property tax law, which prevents total municipal levies from increasing by more than 2.5 percent in a single year. The law forces cities and towns to adjust tax rates if necessary.
During the last decade, Boston’s real estate has undergone a dramatic overhaul. The Seaport District, once a massive parking lot, is now crowded with new buildings. The Big Dig and Rose Kennedy Greenway have transformed downtown. New office and residential towers have risen from North Station to the Fenway.
In total, the assessed value of the city’s real estate has more than doubled in 12 years.
Although Boston has some of the highest-priced property in the country, its total value remains much lower than larger cities such as New York, where assessors tabulated more than $900 billion in property last year.
Still, Boston is growing at a rapid clip, with millions of square feet of buildings under construction. Commercial and residential real estate markets have come alive. More than $10 billion in commercial buildings changed hands during the first nine months of the year, according to the real estate firm JLL. That’s already more than double the $4.7 billion sold last year.
A similar pattern has occurred in the residential market, with prices rising sharply in many neighborhoods. The average selling price of condominiums in the downtown Boston area rose to $830,000 this fall, a 16 percent increase from a year earlier.
“Demand exceeds supply right now, which is placing continuous upward pressure on prices,” said Debra Taylor Blair, president of LINK, which tracks the city’s condo market. “Any property that is considered luxury or exceptional is selling for ultrapremium pricing.”
The increases are pronounced in neighborhoods such as the Back Bay, where the average condo is valued at more than $1.4 million.
Rakow said the sudden hike in values caused the city to take the unusual step of sending letters to notify individual property owners. “We just wanted to give people a heads up and let them know that the increase in the assessment is being driven by the market,” he said.
Many Boston owners will surely face much higher bills next year. An advocate for businesses in the Back Bay said tax hikes are one of many factors making it more difficult for smaller shop owners to continue operating there.
“My concern is that the economics of what it takes to do business on Boylston and Newbury is evolving and will change the character of our neighborhood,” said Meg Mainzer-Cohen, president of the Back Bay Association.
The rising rents and taxes make it harder to prevent national and international chains from taking over all the storefronts. “Soon,” said Mehigan, the owner of Lir and the Globe Bar & Cafe, “it’s going to be all banks and cellphone stores on Boylston Street.”
Casey Ross can be reached at firstname.lastname@example.org.